What are the benefits of purchasing a car in my LLC name?
My credit is pretty good so I plan on co-signing if possible.
all interest, repairs, etc become deductible.
note that the LLC should send you a W-2 for any personal use at the standard mileage rate.
or, you can purchase it personally and submit an expense report for reimbursement by the LLC for business miles at whatever the IRS mileage rate is (changes each year).
either way, personal use of a vehicle is not deductible.
Is it better to lease or buy the car? If you lease the car through an LLC is that 100% decuctible?
personal use of a vehicle is not deductible. period.
the LLC should send you a W-2 for any personal use (keep a mileage log) at the standard mileage rate.
or, you can purchase it personally and submit an expense report for reimbursement by the LLC for business miles (keep a mileage log) at whatever the IRS mileage rate is (changes each year).
OK, but still if it was going to be used 100% for business, is it better to buy or lease? Could 100% of the purchase or lease price be written off?
As a general rule — lease cost can be expensed. Purchase cost is capitalized and depreciated unless IRC section 179 rules allow some or all of the purchase price to be expensed.
Whether it makes good business sense to lease in the first place is something you will have to determine. Personally, I think a lease is more expensive than a purchase in the long run.
Unless you have exceptional circumstances that dictate a lease instead of a purchase, I say buy a two year old, used car. Don’t lease.
Thanks Dave T! That sounded like an answer that was a fact, although I don’t understand it. :help What is Capitalized and depreciated? And why a 2 year old car and just a used car or 1 yr old car? Just sounds like you had a purpose of saying 2 yr old car. :biggrin
of course, he has a 2 yr old car he needs to sell!
It’s personal finance 102 — Don’t waste money on depreciating assets that you could be spending on income producing and/or appreciating assets.
A brand new car loses 20%-30% of its value as soon as you drive it off the lot. If you get into an accident that totals the car the very next day, the insurance replacement value will be at least 20% less than you paid for the car.
If you decide to trade in a brand new car after two years, you will likely find that its trade in value is less than the balance due on your car loan if you financed on a 48 month or longer loan term.
I suggest a two year old car because its price will probably be less than half the new car price for the same model, will still have manufacturer’s warranty left, and after two years there should be adequate repair history for that model year to know whether you are buying a reliable vehicle.
Why used? Just because I don’t know anywhere you will find a two year old car that has not been previously owned.
If you understand how your rental real estate is depreciated during your holding period, then you just apply the same principles to an automobile purchased by your business for use in your business.
When your business buys a vehicle you don’t take a business expense for the cost of the car. Instead, you add it to your books as a capital asset. Each year you depreciate a portion of the cost of the car until it is fully depreciated.
BTW, if you have not taken personal finance 102, go to the library and check out “The Millionaire Next Door”. The basic message of the book is live below your means, don’t waste money on expensive status symbols, and invest in assets that will make you money. The more that you can make your money work for you, the wealthier you will become. The book reveals some of the common traits and spending habits of the person living next door to you whom you would never suspect is a millionaire.
Hey, Mark! For the record, I am still driving the 1992 Town Car that I bought used. It recently turned over 145K miles and I will probably keep it another ten years or until the odometer reads 250K. The daughter-in-law was visiting last week and she commented that my car still looked “mint”. The car has great road feel, a very comfortable ride, and lots of room that my wife just loves. A couple of years ago, I told my wife that they quit making replacement parts for our car (or at least Ford isn’t carrying them in inventory) and I was thinking that maybe we should trade it in. She told me she would trade me in on a younger model before she would let me trade in a perfectly good car with lots of life still left in it. Her attitude is if you buy quality, you should be able to keep it forever. I just smiled, said, “Yes, dear”, and had a dozen roses delivered to her at the house a couple days later.
yep, she’s a keeper. That’s the woman, not the car.